©International Monetary Fund. Not for Redistribution
124 D
EVELOPMENT OF
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ECURITIES
M
ARKETS
: T
HE
I
NDIAN
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XPERIENCE
ment in the emerging market economies. A
comparative position of the
corporate debt market in developing countries and the United States is
presented in Table 5.2.
Historically, India had a bank-dominated
financial system, which was
supplemented by DFIs to provide long-term project finance. However,
the financial system has undergone a marked change in recent years.
With the conversion of DFIs into banks, a gap has been created for long-
term finance. Commercial banks, given the
short-term nature of their
liabilities, may not be able to fill the gap in long-term finance. In view of
this, India’s corporate sector requires long-term finance to supplement its
resources. In this context, development of the
corporate bond market will
play a strategic role in the near future.
The corporate debt market in India has existed since independence.
Public limited companies have been raising capital by issuing debt securi-
ties. In 1985–86, state-owned public sector
undertakings began issuing
bonds. However, in the absence of a well-functioning secondary market,
such debt instruments remained illiquid. In recent years, because of falling
interest rates and adequate availability of funds, corporate debt issuance has
shown
a noticeable rise, especially through private placements (Table 5.3).
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